3/19/2010 @ 10:00AM

The New Financial Crime Wave

Peter Grupe is a busy man. He’s the special agent in charge of white-collar crime cases for the Federal Bureau of Investigation’s New York field office, the bureau’s largest. In October his unit arrested Galleon Group hedge fund operator Raj Rajaratnam and others in what authorities allege was one of the biggest insider trading rings ever uncovered.

This week, the FBI nabbed its first target in a new arena of fraud: stealing from the government’s $700 billion Troubled Asset Relief Program. New York prosecutors announced the arrest of former Park Avenue Bank Chief Executive Charles Antonucci Sr. on charges of lying on an application for $11 million in TARP funds. Bank regulators shut down Park Avenue Bank earlier this month.

And it was agents from the FBI’s New York field office who were there in December 2008 to arrest the hedge fund swindler Bernard Madoff, who’s serving a 150-year sentence in a North Carolina federal prison.

There’s no shortage of work for Grupe and his team. Mortgage fraud is on the rise, as are bogus job counseling services and frauds conducted over the Internet. Since the financial crisis erupted in 2008, the FBI’s 1,000-agent New York office has tripled its mortgage fraud investigations squad and beefed up its securities and financial fraud group.

Grupe says his team is trying to detect frauds earlier by making use of the resources of the FBI’s intelligence group, with a particular focus on cyber crimes. The FBI’s Internet Crime Complaint Center says it received 336,655 fraud complaints last year related to financial losses of $560 million, double the dollar amount reported the year before. “With the sophistication in technology you’re going to see more sophisticated crimes,” Grupe said in a recent interview.

Mortgage crime is a huge focus. In Washington, regulators and federal prosecutors have several task forces aimed at getting warnings out to Americans about common frauds. The most vulnerable are homeowners who are struggling with their mortgages and the elderly, who increasingly are targets of scams involving bogus reverse mortgages and mortgage modifications, according to the Federal Trade Commission.

In one high-profile example, several state attorneys general have sued Rancho Cucamonga, Calif.-based 21 Century Legal Services, alleging it used deceptive sales practices to get homeowners to sign up with it for mortgage modifications for a hefty upfront fee and failed to perform the promised services. Some borrowers who signed on with 21 Century face foreclosure, according to the lawsuits.

The Federal Trade Commission has warned about foreclosure counselors, credit card repair services and mortgage modification middlemen, saying consumers should negotiate directly with their bank and not fall prey to firms demanding upfront fees for services that should be free. The FTC advises consumers not to take unsolicited offers for mortgage modifications, foreclosure counseling and other services.

A twist on mortgage modification scams involves reverse mortgages–a special type of home loan available to the elderly in which the homeowner gets a lump sum or a monthly payment, with the home usually going to the lender after the owner’s death. Criminal cases are popping up all over involving reverse mortgages, particularly in states hardest hit by the bursting of the housing bubble. Earlier this month, two people were arrested in Atlanta and charged with trying to profit off a government loan insurance program by posing as real estate agents and luring seniors into fraudulent reverse mortgage loans using altered real estate records and fake documents.

Scammers are also taking advantage of the swollen jobless population. The FTC launched “Operation Bottom Dollar” in February to go after peddlers of sham career counseling and job-hunting services, and “work at home” opportunities that fail to live up to their promise. Federal prosecutors have filed 43 criminal cases and state prosecutors another 18.

Work-at-home schemes typically offer jobs involving envelope stuffing, craft assembling, or some other seemingly mindless task, but the scammers promise they’ll deliver riches. “When money’s tight, work-at-home opportunities can sound like just the thing to make ends meet,” the FTC said in a February warning. “But the reality is many of these jobs are scams. The con artists peddling them may get you to pay for starter kits or certifications that are useless, and may even charge your credit card without permission.”

Fake checks and bogus prize or sweepstakes notices are also rampant, according to the National Consumer League, which counts them among the top frauds of 2009.

Another fraud that’s big right now is Internet car auction scams, which the FBI warned about last year. Scam artists target people through online auction sites and convince them to send money by wire transfer. It’s a variation on the Nigerian e-mail cons, which promise riches if their marks will send money to help arrange for a fictitious fortune to be moved abroad.